Massachusetts introduces additional cap-and-trade system

On 11 August 2017, the Massachusetts Executive Office of Energy and Environmental Affairs (EEA) announced regulation 310 CMR 7.74 establishing a new cap-and-trade system in the state. The system will be limited to the electricity sector, covering 21 fossil-based power plants. The system will start in 2018 with free allocation of allowances to utilities. From 2019, utilities will be required to purchase all their allowances from an auction. The cap-and-trade program is designed to achieve an 80% reduction in emissions from the covered facilities from8.96 million metric tons in 2018 to 1.8 million metric tons in 2050. The regulation was accompanied by a Clean Energy Standard requiring an increasing share of electricity from clean energy generation (fossil fuels with carbon capture, nuclear, renewables), reaching 80% by 2050.

The additional system covers the same sector as the Regional Greenhouse Gas Initiative (RGGI), a multi-state emissions trading system covering the power sector of nine northeastern states in the US. Thus, covered facilities under the new system are also covered by RGGI and would have to hold both types of allowances for each ton of emissions. The systems will operate in parallel but not directly interact.

The regulations are part of a broader roll out of regulations in light of the May 2016 ruling from the Massachusetts Supreme Court. The Court held that the Massachusetts Global Warming Solutions Act (2008) compelled the Massachusetts Department of Environmental Protection to impose additional measures to ensure that the state would meet both its 2020 target of reducing emissions 25% compared to 1990 levels and 2050 target of reducing emissions 80% by 1990 levels. In response, Governor Charlie Baker directed the EEA and DEP to coordinate and put in place additional mitigation efforts in the state.